Under investor pressure, Facebook is squashing a proposed ownership structure that would allow CEO Mark Zuckerberg to retain voting control of the company even though he could potentially own a minimal amount of shares.

"Facebook's board determined that withdrawing the reclassification was in the best interests of Facebook and its shareholders," a spokesperson told CNBC via email.

Shareholders filed a class action lawsuit intending to block Facebook from issuing reclassified C shares, which some investors argued could cause shares to lose billions of dollars of value when they were traded. The new C shares would be publicly listed but come with no voting rights.

"We are gratified that Facebook and Mr. Zuckerberg have agreed not to proceed with the reclassification we were challenging," Lee Rudy, partner at Kessler Topaz Meltzer & Check LLP which was representing the shareholders, said in a statement. "This result is a full victory for Facebook's stockholders, and achieved everything we could have hoped to obtain by winning a permanent injunction at trial."

It was reported earlier that Facebook had settled the lawsuit, but the company announced it will abandon the plan instead.

Zuckerberg said in a post on Facebook he felt reclassifying the shares was the best way to allow him to still lead the company while donating money to work on global issues like curing diseases, improving education and climate change with his wife Priscilla Chan through the Chan Zuckerberg Initiative. However the company's stock has performed better than expected, making it unnecessary for Zuckerberg to sell shares to fund his project.

"Over the past year and a half, Facebook's business has performed well and the value of our stock has grown to the point that I can fully fund our philanthropy and retain voting control of Facebook for 20 years or more," he wrote. "As a result, I've asked our board to withdraw the proposal to reclassify our stock -- and the board has agreed."